European Union

In the 20-year period 1980-2000 virtually no private jobs were created in the countries of the European Union (EU) as compared to 33 million new private sector jobs in the U.S. Unemployment in the EU reached 10 percent as compared to 4.1 percent in the U.S. As compared to U.S. firms, EU firms pay their governments an amount equal to 50 to 200 percent of employees' wages as "social charges." In addition government-mandated minimum wages often far exceed the value low-skilled workers might contribute to potential employers. Consequently low-skilled unemployed cannot find jobs. Firing workers is costly because of government required severance pay is high. Thus most new hires are temporary workers on short-term contracts. Meanwhile the unemployment rate in the EU among persons under 25 averages around 20 percent.

If the reasons for the EU's high structural unemployment are so obvious, why aren't governments relaxing strict labor laws and reducing social charges levied on employers?

Are there cultural reasons that may explain the different attitudes European workers hold versus the attitudes held by US workers?

Solution Preview

Europe has had a long, long history of statism, government control, and limited to no freedom. Once you understand the politics of a region, you can understand its economic history and policies. Economics flow from politics. Or perhaps more accurately, from laws. There are two eternal laws, that if obeyed, bring economic prosperity, that if ignored, bring economic ruin. Law #1 is "do all you have agreed to" and the second law is "do not infringe on another's person or property." If you follows these laws strictly, economic property can occur. If they are abandoned or trampled upon, economic disaster will naturally follow. You can bet on it.